Appreciate your feedback on the impact of Provident Fund amendment on increasing the wage ceiling to employees who are in Union ie who have a Long term settlement in place.

Industrial Relations And Labour Laws
Management Consultants Legal & Hr
Korgaonkar K A


There is hardly any impact on workers alone because LTS is between them and the employer and the increase in contribution or the subsequent reduction in the take home salary is not due to any act on the part of the employer but it is as a result of operation of law of the state. Normally, the LTS will not say anything about statutory contributions and if for example, there is a provision in the settlement that the PF contribution will be the same throughout the settlement period, the same will not be binding since it is against the law. You cannot have a settlement which is against the law and even if the employees agree that they are happy with a lesser PF, it will not be enforceable. Therefore, LTS will take its way whereas the new amendments in any law will have its own way.

From India, Kannur
korgaonkar k a

Dear Anonymous Friend,
My view is as under:
There will be an impact of this amendment on employee take home, whether he is unionized or not, whether there is a LTS or not. In majority cases, at present PF contribution / deduction is restricted to Rs. 780/-. This contribution is going to increase now since the salaries are hiked and more than Rs. 6500/-.
Also, majority of excluded employees will now come under the PF bracket. Their PF deduction will be maximum up to Rs.1800/-. Presently they are contributing ZERO. There Will be a great impact since take home will be reduced substantially.
One should not forget that, this contribution is a saving of employee with good returns.
Impact on employer is very larger extend according to me.
Some employers are playing with the word CTC and restructuring the CTC to nullify the impact.

From India, Mumbai

Dear Friend,
LTS cannot stipulate any clause with regard to statutory payment etc as applicable which is contrary to law. Even if it contains any such clauses which are agreed by employees, it will not be tenable in the eye of law. Hence, statutory payments / applicable laws will be enforceable including recent amended PF Act.
Due to amended PF Act, employees will have to contribute higher amount as PF contribution as a result they will get lesser net payment of salary per month but alternatively they are benefited as employer will be depositing higher amount of contribution.
Inspite of the above, if there is any problem on the part of employees to understand the situation, it will be the responsibility on the part of the Management to apprise them of the benefits from social security point of view. Of course,HR will take important role to play to make it happen smoothly.

From India, Calcutta

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